This application is related to negotiable instruments. More specifically, this application is related to methods and systems for preventing fraudulent use of negotiable instruments.
A significant concern among financial institutions, as well as among businesses and individuals who accept negotiable instruments generally, is the level of fraud that exists in connection with negotiable instruments. This fraud is manifested in the use of checks, certified checks, travelers' checks, and the like. Because of this concern, a variety of techniques have been developed to permit detection of fraudulent instruments and thereby reduce the incidence of fraud. These techniques may generally be grouped according to two classifications. Techniques in the first classification rely on comparing characteristics of negotiable instruments presented for payment with lists of characteristics known to identify valid instruments. For example, a list of valid serial numbers for negotiable instruments issued by a particular financial institution may be maintained so that when an instrument is presented for payment, a comparison may be made between the serial number of the presented instrument and the list of valid serial numbers. If there is no match, the instrument may be declined. The success of these types of techniques is limited by the ease with which counterfeiters may deduce the relatively simple manner in which serial numbers or other characteristics are assigned.
Techniques in the second classification incorporate fraud-prevention devices directly into the negotiable instruments themselves. In some cases, such devices are used in a uniform fashion, such as when they are applied in substantially the same way to all negotiable instruments issued by a particular financial institution. Examples of such devices include watermarks, pantograph patterns, holographs, and the like incorporated directly into the paper of the instrument. Because these devices are not unique to any particular instrument, their value is mainly in acting as a deterrent to fraud by increasing the difficulty of a counterfeiting process. There are, however, a significant number of counterfeiters who possess the capabilities needed to reproduce such features. A different approach that has been proposed is to print a bar code onto each negotiable instrument, with the bar code derived from information included elsewhere on the instrument, such as its serial number, the amount of the instrument, or the date of execution of the instrument. While this approach has some advantages over other approaches, it tends to be unreliable in systems where instruments are truncated or that otherwise use scanning and electronic transmission of images of the instrument. Furthermore, the presence of a bar code on the instrument requires the use of an additional type of reader when processing the instrument.
There is accordingly a general need in the art for improved methods and systems that prevent fraudulent use of negotiable instruments.